On the morning of March 14, 2024, the State Bank of Vietnam made a report at the conference “Deployment of the monetary policy management tasks for 2024, focusing on removing difficulties for production and business, promoting growth and macroeconomic stability” chaired by the Prime Minister.
CREDIT DECREASE IN MOST SECTORS, EXCEPT REAL ESTATE AND SECURITIES
According to the State Bank of Vietnam, by the end of 2023, credit in the whole economy increased by 13.78% compared to the end of 2022. Due to the seasonal factors of the Lunar New Year and the low absorption capacity of the economy, as of February 29, 2024, credit in the economy decreased by 0.72% compared to the end of 2023. However, the rate of decline in February slowed down (-0.05%) compared to January (-0.6%). With abundant liquidity and a lot of room for credit growth, credit institutions have favorable conditions to supply capital for lending to the economy.
By economic sector, as of the end of January 2024, the outstanding loans of the agricultural, forestry, and aquatic sectors reached about VND 950.8 trillion (a decrease of 0.17%, accounting for 7.05%); the industrial and construction sectors reached nearly VND 3.46 quadrillion (a decrease of 0.13%, accounting for 25.71%); the trade and services sector reached nearly VND 9.06 quadrillion (a decrease of 0.91%, accounting for 67.23%).
Credit for some priority sectors as of the end of January 2024: (i) The agriculture and rural sector reached nearly VND 3.3 quadrillion, down 0.33% compared to the end of 2023, accounting for 24.36% of the total outstanding loans in the economy (in which some key agricultural products such as rice reached over VND 210 trillion, an increase of 1.08%; coffee reached over VND 119 trillion, an increase of 4.11%); (ii) Small and medium-sized enterprises reached over VND 2.4 quadrillion (a decrease of 1.87%, accounting for 18.31%).
As of February 29, 2024, credit in the economy decreased by 0.72% compared to the end of 2023. However, the rate of decline in February slowed down (-0.05%) compared to January (-0.6%).
State Bank of Vietnam.
In the petroleum sector, the credit limit granted by the banking system to 31 petroleum trading businesses (according to the list from the Ministry of Industry and Trade) is estimated at VND 156.173 trillion, and the outstanding loans reached VND 63.645 trillion. These 31 businesses have only used 41% of the credit limit granted by commercial banks.
By the end of January, credit in the real estate sector (i) reached about VND 2.89 quadrillion, an increase of 0.23% compared to the end of 2023, accounting for 21.46% of the total outstanding loans in the economy, the bad debt ratio is 2.73%. Specifically: loans for real estate business reached about VND 1.11 quadrillion, an increase of 1.52%, accounting for 38.37% of real estate credit; loans for self-use/consumer real estate reached about VND 1.78 quadrillion, a decrease of 0.56%, accounting for 61.63% of real estate credit.
Regarding the VND 120 trillion credit program, as of now, 28 provinces and cities have sent letters or publicly announced 68 projects in the program’s loan portfolio, with a total loan demand of over VND 30 trillion. Currently, in addition to the 4 state commercial banks, Tien Phong Bank has registered to participate in the program with an amount of VND 5 trillion. Commercial banks have committed to provide credit for 15 projects with a committed amount of VND 7 trillion, of which VND 646 trillion has been disbursed, specifically: Investors: 8 projects with an amount of VND 640 billion; Homebuyers: 03 projects with an amount of VND 6 billion.
Credit for the securities sector reached nearly VND 111.3 trillion, accounting for 0.83% of the total outstanding loans in the economy, an increase of 2.56% compared to the end of 2023.
Consumer loans for living needs reached about VND 2.82 quadrillion by the end of January 2024, accounting for 20.92% of total outstanding loans in the economy, a decrease of 1.77% compared to the end of 2023.
DOUBLING OF BAD DEBTS IN 2023
The State Bank of Vietnam stated that some banks are still cautious in granting credit due to the increase in bad debts. Although bad debts have been dealt with by credit institutions with an important step, they tend to increase due to negative fluctuations in the global economic situation and the difficulties of the domestic economy that have negatively affected the production and business activities of enterprises, reducing their ability to repay principal/interest to the bank. The non-performing loans of the system of credit institutions by the end of 2023 were 4.55%, an increase compared to 2.03% at the end of 2022.
By the end of 2023, the credit-to-GDP ratio was about 133%, an increase compared to about 125% at the end of 2022, posing risks to the safety of the financial and monetary system.
State Bank of Vietnam
“Regarding the banks, the implementation of collateral asset mechanisms is still inflexible, mainly relying on collateral assets, especially in the current stagnant real estate market. The lack of connection, interaction, sharing, and cooperation between customers and banks in direct exchange to find measures to overcome capital difficulties,” the State Bank of Vietnam report stated.
In addition, mobilizing capital through stocks, bonds, and FDI has increased slowly, and difficulties in the corporate bond market and real estate have not been fundamentally resolved… causing the capital source for growth to continue to focus on bank credit, resulting in a high Credit-to-GDP ratio (about 133% at the end of 2023, an increase compared to about 125% at the end of 2022), which poses risks to the safety of the financial and monetary system.
OBSTACLES TO CREDIT GROWTH
The State Bank of Vietnam stated that many businesses have contracted or ceased operations due to inflationary pressure and rising material prices; many input factors and high production and business costs, so there is no need for borrowing. In addition, in the context of global economic difficulties, inventory policies of importers have changed (reducing average sales from 2-3 months to 3 weeks – 1 month), leading to a decrease in the demand for borrowing to carry out export orders.
In addition, difficult economic growth affects the income of individuals and households, increases savings and reduces consumer credit demand. Real estate credit accounts for about 21% of total credit, so changes in real estate credit will usually lead to changes in total system credit.
Some customer groups have the need but do not meet the requirements for borrowing, especially small and medium-sized enterprises due to: (i) Small scale of capital, limited owner’s capital, financial capacity, and management capability. (ii) Lack of feasible business plans, limited ability to connect with the production chain; (iii) Lack of transparent financial information that affects the credit appraisal capability of credit institutions. (iv) The deployment of credit access solutions through state support mechanisms (Credit Guarantee Fund for Small and Medium Enterprises, Development Fund for Small and Medium Enterprises…) has not been effective. (v) After a difficult economic period, the risk level of customers is assessed higher, and enterprises find it difficult to prove the effectiveness of production and business to banks for lending decisions.
Regarding the VND 120 trillion credit program, there are still many obstacles in the related laws and regulations for social housing projects (land fund, procedures, buying and selling, valuation…); the number of projects for renovation and reconstruction of apartment buildings is very small; some conditions for homebuyers are no longer appropriate.
Regarding the VND 20 trillion program for workers: workers’ income has declined in the context of high unemployment and job losses, leading to no source to repay debts, resulting in a decrease in consumer credit demand…; workers and employees do not fully understand the information while grassroots enterprises and trade unions have not really focused on communication, promoting the loan package.
Some difficulties in inspection and supervision work: Borrowing customers have poor financial conditions or business losses, misuse of borrowed capital; the medium and long-term capital mobilization capacity of credit institutions is still low compared to the long-term capital needs of the economy. Short-term capital mobilization accounts for up to 80% of total capital sources while medium and long-term loans account for 50% of total loans. In addition, bad debts tend to increase, and bad debt resolution is still difficult.
